It's an exciting time when you are buying a home. However, the process can be overwhelming. Navigating through all the necessary steps can be particularly challenging for a first-time home buyer. Knowing what to expect before you start the mortgage process can help you stay on track and make the overall process smoother. Here are some tips to help you learn more about the steps in the mortgage process.
Shop for Lenders and Get Pre-Approved
Before you even start looking at homes, you need to sit down and think about the type of mortgage loan to pursue. The amount you have available for a down payment, your credit score, and other factors will help determine the mortgage that makes the most sense for you. For instance, if you are a member of the military, a VA loan may be the best choice. Or if you are self-employed and don't have W-2's or paycheck stubs to verify your income, a bank statement loan may make sense for you. Once you've narrowed down your options, you can shop for lenders who offer those types of mortgage loans.
Choose and apply to at least three different lenders. This allows you to compare rates and terms and get pre-approved in the process. Real estate agents and sellers will take you more seriously when you are pre-approved for a mortgage loan. You will receive a loan estimate from each lender that details the interest rate, terms, and closing costs. Compare them and take note of the lender who offers you the most favorable rates.
Start Shopping for Homes and Submit an Offer
Getting pre-approved will also tell you how much you can borrow for a home. Your realtor can narrow down the houses to look at your price range. Some lenders also have programs that allow you to get ahead of the loan process by reviewing your loan with underwriters ahead of time and providing a commitment letter stating that you are approved to be financed. You can close faster and get out ahead of competing buyers.
Once you have found a home that meets your needs, it's time to make an offer. The offer will include some conditions such as the appraisal, which will be close to the loan amount, and how the borrower will obtain funding. Once the seller accepts the offer, you both sign a purchase agreement. This means that both parties approve the deal, and you can move on to finalize your loan.
Finalize Your Mortgage Loan and Closing
Now it's time to choose the lender that best aligns with your financial goals and let them know you're ready to proceed. This moves the mortgage to the underwriting process, where you will likely need to submit additional documentation. Respond to these requests as quickly as possible to keep the underwriting process moving.
An underwriter will validate your income, credit history, and other items. A title search will be done to ensure that the property you are purchasing does not have any judgments, liens, or other disputes that could prevent the sale.
There are several other things that you need to get started on during closing. Your lender will require that you have the home appraised to determine its market value. Different types of inspections might also need to be completed depending on the lender, property, and loan type. A home inspection is generally not required by a lender, but it's a good idea to have one completed. They could uncover problems that you might otherwise not know about until well after the loan has been closed.
In the meantime, the underwriter will be completing their review of your finances and make a decision. When you are "cleared to close," it means you have final underwriting approval, and you are set to move forward with a closing date.
The Closing Date
About three days before your official closing date, the lender will send you a closing disclosure. This document outlines the terms of your loan, required down payment, and the closing costs. It is very similar to the loan estimate that you received when you submitted your application for pre-approval. Thoroughly check the closing disclosure against the loan estimate and notify your lender if you have any questions about discrepancies between the two.
Before you head to the closing, ask your lender what you should bring. Generally, you will need to bring a valid ID and cashier's check to cover the down payment and closing costs. The final mortgage agreement documents and a settlement company representative will be available to explain the terms of the contract.
Once you have signed the necessary documents, the lender will deliver funds to the settlement company, who will combine it with your funds and be distributed accordingly. The deed and mortgage are recorded once funds and approval have been obtained. The property is then turned over to your name, and your mortgage process is complete. You're ready to move into your new home!
When you're ready to purchase your dream home, give the experts at NASB a call at 855-465-0753, or click here to learn more.